Developers have reduced bond issuance by more than three times

While the corporate loan market in Russia has generally doubled this year, developers, on the contrary, have reduced bond issuance by more than three times, to RUB 32.8 billion. This is due to the decreasing attractiveness of the instrument as a way to finance the purchase of new development sites, experts say. They expect an influx of developers to the bond market only if the key rate of the Central Bank is reduced.

In January-September, developers issued bonds totaling RUB 32.8 billion. against 103.6 billion rubles. for the same period last year, calculated in Expert RA at the request of Kommersant. According to BC Region, over the three quarters of 2023, construction industry companies issued debt securities totaling 39.5 billion rubles, while a year ago – 82.7 billion rubles, according to the calculations of the NKR rating agency, we are talking about RUB 33.5 billion and 64.2 billion rubles. respectively.

For example, a year ago, only PIK Group issued bonds for 39.5 billion rubles, the Samolet group – for 35 billion rubles, Ingrad, Setl Group and Brusnika – 10 billion rubles each, recall Expert RA ” This year, these developers did not raise funds on the debt market, with the exception of Setl Group, which raised RUB 5.5 billion through this mechanism. Since the beginning of 2023, placements have been predominantly made by small players, such as GloraX, Aston, etc. Of the large developers, bonds were issued by LSR Group (RUB 7 billion), Etalon (RUB 10 billion) and Strana Development. (1 billion rubles).

Yuri Ilyin, vice president for capital markets and corporate finance at PIK, says that the company issues bonds when market conditions are more favorable, when borrowing rates are lower than current ones. Brusnika adds that after the Central Bank increased the key rate this year, first to 12% and then to 13%, public borrowing has become a less effective tool for raising capital. Setl Group notes that it has fulfilled this year’s plan to raise funds through bonds.

As a rule, developers use funds raised on the debt market to purchase new plots and co-finance development projects, explains Ilya Kosolapov, vice president for economics and finance at Etalon. But the decline in housing sales in new buildings throughout the country in the summer-autumn of 2022 and in the first quarter of 2023 forced developers to postpone the purchase of sites and, as a result, new bond placements, notes Vasily Tanurkov, director of the ACRA corporate ratings group.

According to the Nash.Dom.RF information system, in January-August 2023, 1.3 thousand permits were issued for the construction of apartment buildings, which is 28% less year-on-year. Uncertainty with consumer demand amid the possible end of preferential mortgages next year does not yet allow developers to increase borrowing, agrees Mikhail Nikonov, director of corporate ratings at Expert RA.

At the same time, small companies in the construction industry issued bonds in 2023, since it is now difficult for them to attract loans from banks, says Arikapital strategist Sergei Suverov. Large developers, due to established relationships with banks, find it easier to obtain such financing, the expert adds.

Companies from other industries, on the contrary, increased the volume of issuance of new bonds. According to Kommersant’s estimates, based on Cbonds data, since the beginning of 2023, corporate borrowers have placed ruble bonds worth 2.8 trillion rubles, which is twice as high year-on-year. “This was facilitated by the low base effect in the first half of 2022 due to the start of the Russian military special operation in Ukraine and the soft monetary policy of the Central Bank from August 2022 to August of this year,” explains NKR Managing Director Dmitry Orekhov.

The current level of the key rate will significantly limit the demand of developers for new placements until the end of 2023 and at the beginning of 2024, but after its reduction we can expect a return of the construction industry’s interest in this instrument, expects Vasily Tanurkov. According to the Central Bank’s forecasts, in 2024 the average annual rate could be 11.5-12.5%, in 2025 – 7-8%.

Daria Andrianova, Vitaly Gaidaev